FCA raises crypto money laundering fears amid backlog of authorizations

Crypto-asset firms may have to wait longer for UK city watchdog approval due to delays in its process and the discovery that many companies do not meet the standards required by UK rules anti-money laundering.

The Financial Conduct Authority put in place a temporary authorizations regime in January to manage the backlog of applications from crypto-asset companies seeking full authorization under the new anti-money laundering regulations.

Companies that applied before December 16 were able to reapply for temporary authorization, allowing them to continue negotiating until the watchdog could get its workload under control. All those who did not meet the deadline were ordered to cease their activities after January 10.

Existing crypto firms have been allowed to temporarily continue operating until July 9, 2021 under the scheme while their applications are assessed, but FCA says it may now need nine more months to review applications. , extending the expiry date of temporary authorizations to March 31, 2022.

The extension comes despite the fact that some crypto companies have withdrawn their FCA approval requests in light of money laundering control concerns.

“A significantly high number of businesses do not meet the standards required by money laundering regulations,” the watchdog said in a June 3 statement.

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“This has resulted in the withdrawal of an unprecedented number of companies from their applications,” the statement continued.

Fifty-one companies that requested temporary clearances have withdrawn their offers, FCA spokesperson said Financial news.

The FCA has said it will only register businesses where it is “confident” that processes are in place to identify and prevent money laundering and terrorist financing.

The watchdog said the complexity of the requests it received and the impact of the pandemic had slowed its assessment of crypto companies that had applied to be registered before its deadline of January 10, 2021.

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The FCA noted that it lacks consumer protection powers with respect to crypto and crypto companies, and said that “many crypto-assets are highly speculative and therefore can lose value quickly. “.

“If consumers are investing in crypto-assets, they should be prepared to lose all of their money,” the FCA said.

The watchdog also warned that consumers are unlikely to be able to access the Financial Ombudsman Service or the Financial Services Compensation Scheme when it comes to crypto, even if the company is registered with the FCA.

To contact the author of this story with comments or news, email James Booth